Monday, February 22, 2010

George Will said Sunday that people only talk about the government being broken when the Left is having trouble enacting its agenda.

During the Roundtable segment on ABC's "This Week," "Nightline" host Terry Moran brought up the recent announcement by Sen. Evan Bayh (D-Ind.) that he would not seek reelection in November because "Congress is not operating as it should."

When the baton was tossed to him, Will said, "[W]ith metronomic regularity, we go through these moments in Washington where we complain about the government being broken. These moments have one thing in common: The Left is having trouble enacting its agenda."

Will followed by noting, "No one when George W. Bush had trouble reforming Social Security said, 'Oh, that's terrible - the government's broken'"

TERRY MORAN, HOST: There's a sense that something is broken in Washington summed up this week by Senator Evan Bayh (D-Ind.) who announced his retirement. I think it's fair to say he's leaving in disgust. Here's what he had to say.

SENATOR EVAN BAYH, (D-IND.): I have had a growing conviction that Congress is not operating as it should. There is much too much partisanship, and not enough progress. Too much narrow ideology, and not enough practical problem solving. Even at a time of enormous national challenge, the people's business is not getting done.

MORAN: Is he right, George?GEORGE WILL: Well, it's hard to take a lecture on bipartisanship from a man who voted against the confirmation of Chief Justice Roberts, the confirmation of Justice Alito, the confirmation of Attorney General Ashcroft, the confirmation of Condoleezza Rice as Secretary of State. Far from being a rebel against his Party's lockstep movement, Mr. Bayh voted for the Detroit bailout, for the stimulus, for the public option in the healthcare bill. I don't know quite what his complaint is, but, Terry, with metronomic regularity, we go through these moments in Washington where we complain about the government being broken. These moments have one thing in common: The Left is having trouble enacting its agenda. No one when George W. Bush had trouble reforming Social Security said, "Oh, that's terrible - the government's broken."

And the latest person to be caught in that dilemma and become seduced by siren song of price controls is President Barack Obama who’s announced seeking “sweeping new authority to curb exorbitant rate hikes by the nation’s health insurance companies”.

Obama’s proposal would give the Health and Human Services secretary, Kathleen Sebelius, new powers to review premium hikes by private insurance companies – and in some cases, block those deemed excessive. Anthem’s rate hikes of up to 39 percent in recent weeks have focused attention on the skyrocketing health insurance costs, the very costs Obama vowed to fight when he undertook comprehensive health care reform last year. Obama’s plan would create a new board made up health insurance experts, which would determine annually what are reasonable premium hikes in various markets, and the HHS secretary also would work with state officials, the White House said.

At least part of those rate increases are due to Obama’s proposals themselves. His health care reforms were always going to drive costs up. According to Noam Levey of the LA Times, who examined the New York experience, average insurance rates were bound to go up simply because coverage was going to be extended to the uninsured — increasing the demand — and mandating that people with pre-existing medical conditions could not be refused. With more and higher-risk consumers entering the market and the supply of medical services inelastic in the short term, prices were bound to go up. If people can “buy insurance on the way to the hospital” as one economist put it, then the money had to come from somewhere else in the insurance pool. Levey said, “premiums in New York are now the highest in the nation by some measures, with individual health coverage costing about $9,000 a year on average.” But since higher premiums would mean political suicide for the Administration it is going to square the circle by imposing price controls. So what’s wrong with that? The problem with price controls is that it eventually creates underprovision and shortages in the long run. Everybody will remember his lesson from Economics 101. Here’s how Wikipedia retells it.

The primary criticism leveled against price controls is that by keeping prices artificially low, demand is increased to the point where supply can not keep up, leading to shortages in the price-controlled product. Shortages, in turn, lead to black markets where prices for the same good exceed those of an uncontrolled market. Furthermore, once controls are removed, prices will immediately be subject to rampant inflation, which can temporarily shock the economic system.

A classic example of how price controls cause shortages was during the Arab oil embargo between October 19, 1973 and March 17, 1974. Long lines of cars and trucks quickly appeared at retail gas stations in the U.S. and some stations closed because of a shortage of fuel at the low price set by the U.S. Cost of Living Council. The fixed price was below what the market would otherwise bear and, as a result, the inventory disappeared. It made no difference whether prices were voluntarily or involuntarily posted below the market clearing price. Scarcity resulted in either case. Price controls fail to achieve their proximate aim, which is to reduce prices paid by retail consumers, but such controls do manage to reduce supply.

At the margin the higher cost health care providers are driven out of business. Investment flows to non-price controlled industries unless capital controls are imposed and price controlled health care becomes an unattractive industry to do business in. Sooner or later good doctors become as hard to find as vacant rent controlled apartments in Manhattan, which is to say, hard to find unless you’re Charlie Rangel. But if price controls and artificially low rates cause so much damage why do politicians resort to it? Maybe because they live in a psychological world where everything could be ‘fixed’ by writing the right words or talking to the right people. Never mind the underlying economics. So why not make health care affordable by increasing demand on a fixed supply and then imposing price controls? Simple isn’t it? Except that it can’t be done, and when the scheme falls apart in the end many politicians will be genuinely surprised because it’s always worked before. Some people will never grasp the principle, strange as it may seem.

It's the politicos disease: the belief that words can change reality. That commands can stop the tides. It's an ancient problem that's made worse when people with no real-world accomplishments are in charge.

The problems you eventually face when you rely too much on one thing have become apparent in Venezuela. Being dependent on one dam to supply your country with over half its electricity is a good example of non-diversification that comes back to bite you. that's true in finance as well as a country's infrastructure.

Hugo Chávez may be wondering, as Venezuela's taps run dry and its cities fall into darkness, whether God is on the side of the Yankees.

The El Niño weather phenomenon appears to be taking sides as it parches leftist-ruled parts of South America and brings bounty to US farmers and corporations. One of the severest droughts in decades has given Venezuela's socialist president a political nightmare as hydro-electrical power dribbles to a standstill, unleashing blackouts, rationing and protests. The waters behind the Guri dam, which supplies more than half the nation's power, have touched perilously low levels. Chávez has declared an "electricity emergency", urging people to spend no more than three minutes in the shower. The president has even dispatched Cuban pilots to seed clouds for rain.

Sunday, February 21, 2010

WHY BLOGGING HAS SLOWED WAY, WAY DOWN

Thanks to those who read our blog regularly and especially those who asked why we have not been blogging lately. The answer is that I have been incredibly busy with our new venture.

Let me explain.

For almost a quarter century my partners and I have provided financial advice and asset management to individuals, families and institutions throughout the world. We began in the mid 1980s with Kidder, Peabody & Co. Kidder was acquired by GE and after a few years sold to Paine Webber. About 10 years ago Paine Webber was bought by UBS, the large Swiss bank. Throughout all this the name on my office door changed but we continued to provide the kind of financial services that my clients expected and appreciated.

The market collapse of 2008 made us consider whether we should continue to work for a major firm or whether independence was better for our clients and ourselves. We decided to form our own Registered Investment Advisory (RIA) firm, Korving & Co LLC, and opened our doors on January 29th.

We have had an overwhelmingly positive response from our clients and we have been working day and night to bring them to our new custodian.

Blogging will be light for the next few months, but I will find the time to post things that interest me from time to time.

Glenn Beck at CPAC

Wednesday, February 10, 2010

When an organization has to launder it's contributions to hide the fact that it is bankrolling a political campaign, you know that there is something very unethical going on. How's this for "transparency?"

A new Web site targeting the tea parties is a part of a complex network of money flowing from the mountainous coffers of the country's biggest labor unions and trickling slowly into political slush funds for Democratic activists.

A seemingly grassroots organization that's mounted an online campaign to counter the tea party movement is actually the front end of an elaborate scheme that funnels funds -- including sizable labor union contributions -- through the offices of a prominent Democratic party lawyer.

A Web site popped up in January dedicated to preventing the tea party's "radical" and "dangerous" ideas from "gaining legislative traction," targeting GOP candidates in Illinois for the firing squad.

"This movement is a fad," proclaims TheTeaPartyIsOver.org, which was established by the American Public Policy Center (APPC), a D.C.-based campaign shop that few people have ever heard of.

But a close look reveals the APPC's place in a complex network of money flowing from the mountainous coffers of the country's biggest labor unions into political slush funds for Democratic activists.

Saturday, February 06, 2010

Andy McCarthy and I have both been looking at Attorney General Eric Holder’s latest effort to defend in a letter to Mitch McConnell the administration’s handling of the Christmas Day bomber. McCarthy sums it up:

The fundamental problem with the attorney general’s line of argument is that it unfolds as though there were no war and no president. Abdulmutallab, Holder believes, is just like any other person arrested in the United States: When an arrest happens, government officials automatically employ “long-established and publicly known policies and practices.” It does not matter who sent the person or what he was arrested trying to do. Miranda warnings are given, lawyers are interposed, charges are filed, and trials are conducted. Even if the nation is at war, we don’t inquire into whether the arrested person is an operative dispatched here by hostile forces to commit mass murder.

Aside from the sloppy legal work by Holder (including citing cases that have been since overturned by the Supreme Court), it is curious to see that the Obami are now retreating to the defense that “Bush did the same thing”

For the mathematically chyallenged, ther is a differnce between 26% and 50%.

The Netherlands has asked the UN climate change panel to explain an inaccurate claim in a landmark 2007 report that more than half the country was below sea level, the Dutch government said Friday.

According to the Dutch authorities, only 26 percent of the country is below sea level, and the Intergovernmental Panel on Climate Change (IPCC) will be asked to account for its figures, environment ministry spokesman Trimo Vallaart told AFP.

Liberal expressions of disdain for the intelligence and emotional maturity of the electorate have been, post-Massachusetts, remarkably unguarded. New York Times columnist Charles Blow chided Obama for not understanding the necessity of speaking "in the plain words of plain folks," because the people are "suspicious of complexity." Counseled Blow: "The next time he gives a speech, someone should tap him on the ankle and say, 'Mr. President, we're down here.' "

A Time magazine blogger was even more blunt about the ankle-dwelling mob, explaining that we are "a nation of dodos" that is "too dumb to thrive."

Obama joined the parade in the State of the Union address when, with supercilious modesty, he chided himself "for not explaining it [health care] more clearly to the American people." The subject, he noted, was "complex." The subject, it might also be noted, was one to which the master of complexity had devoted 29 speeches. Perhaps he did not speak slowly enough.

And believe in their moral superiority and the rightness of their rule:

It is an old liberal theme that conservative ideas, being red in tooth and claw, cannot possibly emerge from any notion of the public good. A 2002 New York Times obituary for philosopher Robert Nozick explained that the strongly libertarian implications of Nozick's masterwork, "Anarchy, State, and Utopia," "proved comforting to the right, which was grateful for what it embraced as philosophical justification." The right, you see, is grateful when a bright intellectual can graft some philosophical rationalization onto its thoroughly base and self-regarding politics.

This belief in the moral hollowness of conservatism animates the current liberal mantra that Republican opposition to Obama's social democratic agenda -- which couldn't get through even a Democratic Congress and powered major Democratic losses in New Jersey, Virginia and Massachusetts -- is nothing but blind and cynical obstructionism.

By contrast, Democratic opposition to George W. Bush -- from Iraq to Social Security reform -- constituted dissent. And dissent, we were told at the time, including by candidate Obama, is "one of the truest expressions of patriotism."

I think he has it right.

For liberals, the observation that "the peasants are revolting" is a pun. For conservatives, it is cause for uncharacteristic optimism. No matter how far the ideological pendulum swings in the short term, in the end the bedrock common sense of the American people will prevail.

The ankle-dwelling populace pushes back. It recenters. It renormalizes. Even in Massachusetts.

Watch what you say and post on the Internet. There is no longer a press "gatekeeper" to protect you and re-write history or to send it down the memory hole.

Herewith Nancy Pelosi in 2003 when the economy was beginning to create millions of new jobs under President Bush.

August 1, 2003

Washington, D.C. -- House Democratic Leader Nancy Pelosi released the following statement today on the Bureau of Labor Statistics' announcement that 470,000 people abandoned their job searches in July and that 3.2 million private sector jobs have been lost since President Bush took office:

“The fact is that President Bush’s misguided economic policies have failed to create jobs. Since President Bush took office, the country has lost 3.2 million jobs, the worst record since President Hoover. And today we learned that in July nearly half a million people gave up looking for a job.

“Job losses are taking a real toll on the financial security of American families. While Democrats are fighting for opportunity, jobs, and economic security for working families, Republicans continue to focus on helping those who need help the least.

“According to today’s survey, while the national unemployment rate dropped slightly, it still stands at a near record high. In addition, the unemployment rate for African Americans was still over 11 percent in July, and the unemployment rate for Hispanics was 8.2 percent in July.

“It is time for President Bush and the Republicans to get to work for all Americans, not just the elite few.”

That was before Pelosi and her "elite few" cronies began using the US Air Force as their personal airline.

Thursday, February 04, 2010

In expansive remarks at a law school in Florida, Justice Clarence Thomas on Tuesday vigorously defended the Supreme Court’s recent campaign finance decision.

And Justice Thomas explained that he did not attend State of the Union addresses — he missed the dust-up when President Obama used the occasion last week to criticize the court’s decision — because the gatherings had turned so partisan....

Justice Thomas said the First Amendment’s protections applied regardless of how people chose to assemble to participate in the political process.

“If 10 of you got together and decided to speak, just as a group, you’d say you have First Amendment rights to speak and the First Amendment right of association,” he said. “If you all then formed a partnership to speak, you’d say we still have that First Amendment right to speak and of association.”

“But what if you put yourself in a corporate form?” Justice Thomas asked, suggesting that the answer must be the same.